Risks of Public-Private Partnerships

Physical infrastructure such as roads or railways involves construction risks. If the product is not delivered on time, exceeds cost estimates or has technical defects, the private partner typically bears the burden.

The private partner faces availability risk if it cannot provide the service promised. For example, the company may not meet safety or other relevant quality standards when running a prison, hospital or school.

Demand risk occurs when there are fewer users than expected for the service or infrastructure, such as toll roads, bridges or tunnels. If the public partner agreed to pay a minimum fee no matter the demand, that partner bears the risk.

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